Soc-Gen Revises Lira Forecast Lower, Keeps as Top Emerging Pick

By Benjamin Harvey -
Jun 29, 2012

Societe Generale SA (GLE) revised its
year-end forecast for the lira downward, while maintaining the
Turkish currency as its top pick among emerging-market
countries.

The French investment bank now sees the exchange rate at
1.65 per dollar, which is weaker than its earlier expectation of
1.60 per dollar. The revision reflects recent softness in the
currency, according to an e-mailed report from Benoit Anne, a
London-based strategist. The lira has depreciated 1.9 percent
this quarter, trading at 1.8159 per dollar by 9:45 a.m. in
Istanbul.

Societe Generale has the most bullish of 22 forecasts for
the lira by the end of this year, according to data compiled by
Bloomberg. Lloyds Banking Group has the most bearish forecast,
seeing the currency at 2.02 per dollar.

“The lira remains our top emerging-market currency pick by
year-end,” Anne said. “A move of well over 10 percent by
December is quite likely in our view.”

The central bank may cut its inflation forecast for 2012,
Governor Erdem Basci said yesterday, reinvigorating speculation
about a rate cut. He may lower forecast of a 6.5 percent rate by
year-end to the bank’s 5 percent official target if the downward
trend in commodity and oil prices continues.

Crude oil prices have plunged 23 percent this quarter,
heading for the biggest drop since the final three months of
2008. Turkey imports almost all of the oil it consumes. The
Standard & Poor’s GSCI Spot Index of 24 raw materials has
dropped 16 percent from this year’s highest close of 715.52 on
Feb. 24.

Inflation slowed to 8.3 percent last month from a three-
year high of 11.1 percent as the average cost of daily funding
rose to 9.8 percent in May from 8.3 percent in April. June’s
figure on price increases will be released July 3.